What Is Rental Yield?
Rental yield measures the annual rental income a property generates as a percentage of its value or purchase price. It gives investors a quick way to compare the income-generating potential of different properties.
There are two versions:
- Gross rental yield — income only, before expenses
- Net rental yield — income minus running costs
How to Calculate Gross Rental Yield
Formula:
Gross Rental Yield = (Annual Rental Income ÷ Purchase Price) × 100
Example:
- Purchase price: $1,200,000
- Monthly rent: $3,500
- Annual rent: $3,500 × 12 = $42,000
- Gross yield: ($42,000 ÷ $1,200,000) × 100 = 3.5%
Gross yield is useful for quick comparisons between properties — but it ignores all the costs of owning and renting out a property.
How to Calculate Net Rental Yield
Formula:
Net Rental Yield = ((Annual Rental Income − Annual Expenses) ÷ Purchase Price) × 100
Annual expenses typically include:
| Expense | Typical Annual Cost |
|---|---|
| Property tax (non-owner-occupied) | Varies by AV (can be $3,600–$12,000+ for private) |
| Maintenance / sinking fund (condo) | $2,400–$6,000 (depends on development) |
| Agent commission (new tenancy) | ~1 month rent (amortised over tenancy) |
| Insurance (fire, liability) | $200–$600 |
| Repairs and maintenance (ad hoc) | Budget 0.5%–1% of annual rent |
| Mortgage interest (if leveraged) | Depends on loan size and rate |
Note: If the property is mortgage-financed, net yield calculations may or may not include mortgage payments — clarify with clients whether they mean cash-on-cash return or yield on total property value.
Example (continuing from above):
- Annual rental income: $42,000
- Property tax (non-OO): ~$4,800
- Maintenance / management fees: ~$3,600
- Agent commission (amortised 1 month over 2yr): ~$1,750
- Insurance and repairs: ~$800
- Total annual expenses: ~$10,950
- Net income: $42,000 − $10,950 = $31,050
- Net yield: ($31,050 ÷ $1,200,000) × 100 = 2.6%
The gap between gross (3.5%) and net (2.6%) is significant — and many investors make decisions based only on gross yield.
Typical Rental Yields by Property Type (Singapore, 2026)
The following are indicative ranges. Actual yields vary by location, unit size, condition, and market conditions:
| Property Type | Gross Yield (Indicative) | Net Yield (Indicative) |
|---|---|---|
| HDB resale flat (3-rm/4-rm) | 3.5%–5.0% | 2.5%–3.5% |
| Mass market condo (OCR) | 3.0%–4.0% | 2.0%–3.0% |
| Mid-tier condo (RCR) | 2.5%–3.5% | 1.5%–2.5% |
| Core Central Region (CCR) | 2.0%–3.0% | 1.0%–2.0% |
| Landed residential | 1.5%–2.5% | 0.5%–1.5% |
| Shophouse (conservation) | 2.5%–4.0% | 1.5%–3.0% |
These are illustrative estimates only. Always verify with current rental transaction data from URA, SRX, or PropertyGuru.
Key observation: HDB flats generally deliver higher rental yields than private residential — though foreigners cannot buy HDB, and HDB resale investment carries its own eligibility and MOP constraints.
Rental Yield vs Capital Appreciation
In Singapore, many residential properties have historically been bought more for capital appreciation than rental yield — especially in prime districts where yields can be sub-2% net.
Investors need to consider both:
- Total return = rental yield + capital gain over holding period
- Cash flow = net yield − mortgage interest rate (if leveraged)
For a leveraged property, if the net yield is 2.5% and the mortgage rate is 3.5%, the investor has negative cash flow of approximately 1% per annum on the loan portion. This is only viable if capital appreciation expectations are positive.
Rental Yield and Stamp Duty Payback Period
For investor clients paying ABSD, rental yield also determines how many years it takes to recover the stamp duty:
Example — SC buying 2nd property (ABSD 20%):
- $1,200,000 purchase × 20% ABSD = $240,000 ABSD paid
- Net annual rental income: $31,050
- ABSD recovery from rental income alone: $240,000 ÷ $31,050 = ~7.7 years
This payback frame helps clients understand the true holding cost of investment property and why holding period matters.
CEA Agent Checklist: Advising on Rental Yield
- Always show clients both gross and net yield — not just gross
- Include property tax (non-OO rates), maintenance, and agent fees in net yield estimates
- Check current URA/SRX rental transaction data for comparable units before quoting a rental estimate
- For leveraged purchases: compare net yield vs mortgage rate to assess cash flow
- For ABSD-paying investors: calculate the ABSD payback period from rental income
- Remind clients that rental yield is income return only — total return includes capital gain/loss
- HDB investment: note that HDB MOP must be completed before renting out the full flat